A new five-year milk supply management scheme is to be introduced by Lakeland Dairies in 2023 which will apply a 3p/l deduction on “new milk” coming from NI suppliers during the peak months of April, May and June.

Under the scheme, each supplier will have a reference volume based on what they produced in the same months in 2021. Any new milk above this reference from 2023 onwards will incur the 3p/l deduction. In the Republic of Ireland (ROI) the deduction is set at 4c/l.

For NI suppliers, there will also be an adjustment to volume bonuses, which will be reduced by 50% over the April to June period.

In addition, no new entrants will be taken on in 2023, and from 2024 onwards they will have to go through an application process, and all milk they supply during peak months will be deducted 3p/l.

However, while the scheme is penalising new milk at peak, it also includes some incentives to encourage increased output in low production months. In NI, Lakeland has chosen October as the reference month (January in ROI), and any new milk supplied over that from October 2021 will attract a 3p/l bonus.

A new entrant from 2024 onwards will get an extra 3p/l in this month. All volume bonus payments in September through to December will increase by 50%.

Speaking to the Irish Farmers Journal, Lakeland chief executive Michael Hanley said the co-op has to balance processing capacity and supply during peak months. “We are in reasonable shape for the next few years, but we have to be able to process whatever milk our farmers have. We have to protect existing suppliers,” he claimed.

He added that in a recent survey of suppliers, very few said they were considering exiting the industry, and instead, “60 to 70%” indicated that they intend increasing production.

But with limited capacity on the island during peak months, the obvious solution for Lakeland would be to further invest in stainless steel.

“We are not afraid to do the capital expenditure, but some of this is outside our control,” responded Hanley, who pointed to the recent debate in NI around climate change legislation as an indicator of some of the challenges that lie ahead.

He also warned that if Lakeland finds itself in a position that it has excess milk at peak, the co-op will have to sell this on the open market, so the 3p/l deduction on new milk might be a best case scenario.

Appeals

The scheme will be reviewed post peak milk supply in 2025. There will be an appeals committee set up involving the Lakeland chair, vice chair, two Lakeland personnel and two independent experts. As well as dealing with issues such as a farmer who had low production in 2021 due to an issue outside their control, this committee will assess applications from new entrants.

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